Monday, May 29, 2017

Nothing symbolises how far, and fast, India has moved in terms of opening its markets than last week’s abolition of the Foreign Investment Promotion Board (FIPB). Set up as part of the 1991 economic reforms, the FIPB was a high-level inter-ministerial group that cleared foreign investment proposals in the country at a time when most investment avenues were off bounds. At a time when bringing in foreign investment also meant a plethora of clearances from various ministries, the FIPB served as a one-window clearance—and no matter which ministry it was housed in, the prime minister’s office was always keeping a watch on it.
Over a period of time, as the economy grew stronger and corporate India became more competitive, various restrictions on foreign investment started getting relaxed. Indeed, relaxing of FDI restrictions went almost hand in hand with the lowering of import duties since both symbolised the ability of Indian firms to take on global competition. In the initial years, for instance, India restricted how much foreign investment was allowed in the telecom sector; later, however, even 100% FDI was allowed. Till even a few years ago, while foreign pharmaceuticals firms were allowed to set up new plants in India—greenfield, in jargon—they were not allowed to take over Indian firms; indeed, at one time, the fear was foreigners would buy out Indian firms and that this would raise medicine prices and reduce availability.
29/05/17 The Financial Express